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China calls in the loans

“‘In a lot of the world, the clock has hit midnight’: China is calling in loans to dozens of countries from Pakistan to Kenya”

– Bernard Condon and the Associated Press in a major article for Fortune magazine.

Here are some excerpts from the article that struck me:

In the past under such circumstances [debtor countries being unable to make interest payments], big government lenders such as the U.S., Japan and France would work out deals to forgive some debt, with each lender disclosing clearly what they were owed and on what terms so no one would feel cheated.

But China didn’t play by those rules. It refused at first to even join in multinational talks, negotiating separately with Zambia and insisting on confidentiality that barred the country from telling non-Chinese lenders the terms of the loans and whether China had devised a way of muscling to the front of the repayment line.

And

Along with the usual mix of government mismanagement and corruption are two unexpected and devastating events: the war in Ukraine, which has sent prices of grain and oil soaring, and the U.S. Federal Reserve’s decision to raise interest rates 10 times in a row, the latest this month. That has made variable rate loans to countries suddenly much more expensive.

All of it is roiling domestic politics and upending strategic alliances.

In March, heavily indebted Honduras cited “financial pressures” in its decision to establish formal diplomatic ties to China and sever those with Taiwan.

Last month, Pakistan was so desperate to prevent more blackouts that it struck a deal to buy discounted oil from Russia, breaking ranks with the U.S.-led effort to shut off Vladimir Putin’s funds.

And, which I did not expect,

China has also pushed back on the idea, popularized in the Trump administration, that it has engaged in “debt trap diplomacy,” leaving countries saddled with loans they cannot afford so that it can seize ports, mines and other strategic assets.

On this point, experts who have studied the issue in detail have sided with Beijing. Chinese lending has come from dozens of banks on the mainland and is far too haphazard and sloppy to be coordinated from the top. If anything, they say, Chinese banks are not taking losses because the timing is awful as they face big hits from reckless real estate lending in their own country and a dramatically slowing economy.

And

The hunt began in 2011 when a top World Bank economist asked [Brad] Parks to take over the job of looking into Chinese loans. Within months, using online data-mining techniques, Parks and a few researchers began uncovering hundreds of loans the World Bank had not known about.

China at the time was ramping up lending that would soon become part of its $1 trillion “Belt and Road Initiative” to secure supplies of key minerals, win allies abroad and make more money off its U.S. dollar holdings. Many developing countries were eager for U.S. dollars to build power plants, roads and ports and expand mining operations.

But after a few years of straightforward Chinese government loans, those countries found themselves heavily indebted, and the optics were awful. They feared that piling more loans atop old ones would make them seem reckless to credit rating agencies and make it more expensive to borrow in the future.

So China started setting up shell companies for some infrastructure projects and lent to them instead, which allowed heavily indebted countries to avoid putting that new debt on their books. Even if the loans were backed by the government, no one would be the wiser.

In Zambia, for example, a $1.5 billion loan from two Chinese banks to a shell company to build a giant hydroelectric dam didn’t appear on the country’s books for years.

This I did expect:

Another AidData report around the same time suggested that many Chinese loans go to projects in areas of countries favored by powerful politicians and frequently right before key elections. Some of the things built made little economic sense and were riddled with problems.

In Sri Lanka, a Chinese-funded airport built in the president’s hometown away from most of the country’s population is so barely used that elephants have been spotted wandering on its tarmac.

Amusing at first sight, but the consequences are less funny:

As Parks dug into the details of the loans, he found something alarming: Clauses mandating that borrowing countries deposit U.S. dollars or other foreign currency in secret escrow accounts that Beijing could raid if those countries stopped paying interest on their loans.

In effect, China had jumped to the front of the line to get paid without other lenders knowing.

This has led to…

“The other creditors are saying, ‘We’re not going to offer anything if China is, in effect, at the head of the repayment line,’” Parks said. “It leads to paralysis. Everyone is sizing each other up and saying, ‘Am I going to be a chump here?’”

44 comments to China calls in the loans

  • terry needham

    Countries that make deals with indebted nations do so out of enlightened self-interest. I suspect that China will eventually discover that it owns 100 per cent of nothing. Couldn’t happen to a nicer bunch of guys. I call it “Doing a Putin”.

  • Steven R

    Of course the Chinese could just send troops to make an example of a country or two. Since they sit on the UN Security Counsel and have veto powers no UN troops will be forthcoming to counter the move, and the West is bankrupting itself and bleeding their militaries dry supporting the Ukrainians because Putin is bad and whatnot, plus who cares what yellow people do to brown people on the far side of the world? When the world’s leaders and press suck up to them, the Chinese pretty much have a free hand in overthrowing some local governments.

    Not that we have much room to talk when it comes to overthrowing governments or sending in troops to protect corporations and big money. Banana Republic is more than just a clothing store, right Dole and Del Monte?

  • JohnK

    Steven:

    The west is indeed supporting Ukraine, but hardly to the point of bankrupting ourselves. Our welfare states will do that very efficiently in a few years.

    So do you think we should have sat back and let Putin roll up the Ukraine? Maybe having Russia back in the heart of Europe is your idea of a good outcome?

  • george m weinberg

    You expected elephants on the tarmac? I call bs.

  • and the West is bankrupting itself and bleeding their militaries dry supporting the Ukrainians because Putin is bad and whatnot

    Ukraine is costing the West chump change compared to all that other rubbish state spending that does vastly more damage.

    Can you not see what a geopolitical disaster it would be to have Russia move from being a peripheral threat to once again being a Central European power bordering with Slovakia & Romania? Fortunately, you are in a minority in not seeing the parallel with Chamberlain in 1938.

  • Paul Marks.

    “Belt and Road” was always bait-and-switch designed to crush countries with debt.

    As for the monetary and financial (banking) system of China – it is a mess, and the monetary and financial (banking) system of all Western nations is also a mess.

    Even Switzerland abandoned the last link with physical reality (with a commodity) – back in the 1990s, with the new “we celebrate our diversity” (Swiss voters thought that meant German, French, Italian and Romansh languages – but, even then the elite meant something else by “diversity”) Constitution introduced in the 1990s – which quietly dropped the last link with gold.

    Today the monetary and financial (banking) system of all Western nations is magic pixie dust – held up by moonbeams.

    As for the productive economy – China produces vastly more manufactured goods than the United States does. Which is why the Economist magazine does not give manufacturing output figures any more (just “GDP” – which is really a measure of SPENDING not production) – “best not to alarm the Plebs – they might launch an armed uprising demanding the return of President Trump”.

  • Paul Marks.

    “Paul, you do not understand – the Chinese monetary and financial (banking) system is just lights on computer screens, which can be manipulated on the whims of the powerful”.

    No, I understand that very well – my point is that all Western nations are just as bad in their monetary and financial (banking) system.

  • Steven R

    I realize that after the first 31 trillion in red the US owes, the 200 billion or so we’ve given to Ukraine to stop Putin is chump change, but it’s still another 200 billion with no end in sight. Meanwhile the costs of every consumer good in the US keeps going up while my paycheck doesn’t (including food), the Dems are trying to pack the Supreme Court, the cry for Danegeld in the form of reparations just keep getting louder, the DoJ is totally out of control to the point they’re laughing at Congress, and another million or so people from South of the Border will start squatting in the US this year with the approval of Pedo Joe. Stopping Putin from getting the Soviet band back together is fine and all, but at some point either we need to do more than keep writing checks (e.g. send troops) or just call it a day. Frankly, Putin is the least of my concerns, and considering Europe as a whole have spent somewhere in the neighborhood of 80 billion, or less than half what the US has, it isn’t really much of a concern to Europe.

  • Stopping Putin from getting the Soviet band back together is fine and all, but at some point either we need to do more than keep writing checks (e.g. send troops) or just call it a day.

    Even most of the Ukrainians I know think getting NATO involved directly is a stupid idea. Moreover, I don’t know a single one who doesn’t think they can win this war themselves if given the gear, so quite why you want US soldiers to get killed is unclear to me.

    it isn’t really much of a concern to Europe.

    You are not well informed.

  • Steven R

    I’m not worried about percentage of GDP, and I’m certainly not worried about numbers from a year ago. Total dollars or pounds or euros or whatever is what matters. Let Europe do the heavy lifting for once. It’s Europe’s war. Europe can take the lead in dealing with it. We can’t afford it. America gave at the office.

  • You wrote:

    it isn’t really much of a concern to Europe

    Percentage of GDP going to help Ukraine is a good measure of who is concerned. So your remark about absolute numbers is irrelevant to “concern” for reasons I should not need to explain.

  • Paul Marks.

    Steven R, the United States went legally bankrupt in 1933 – when the Federal Government failed to meet its contractual obligations (indeed forbad anyone to meet their contractual obligations – if those contractual obligations involved a gold clause in the contract). Anyone can pay debts in money they create from paper (or now – from lights on computer screens), that is fraud (of the “legal” sort).

    However, American SOCIETY remained sound – strong families, strong churches, strong secular cultural institutions and so on. So production could recover over time – because most people were hard working, honest, and dependable.

    However, over the last 60 years (at least) society has decayed – horribly decayed.

    As for the economic position – the official Federal Government debt is 32 Trillion Dollars, but the unfunded liabilities (such a Social Security and Medicare) are many Trillions on-top-of-that. Yes the government can create “money” to pay all these debts – but the money will be worthless. In due course it will be replaced by international digital money – for full totalitarianism.

    And society continues to fall apart.

    Get out of the big cities – get far away from them.

  • Paul Marks.

    As for the Ukraine – Mr Putin invaded, and he should not have invaded.

    His invasion was bad for the Ukraine and was bad for Russia.

    Typing the above two lines does not make me a puppet of the Biden Administration, BlackRock, or the “International Community”, all of which I despise.

  • bobby b

    “In effect, China had jumped to the front of the line to get paid without other lenders knowing.”

    Interestingly enough, under globally recognized laws of Secured Transactions, the debtor countries defrauded all of their other lenders when they made such agreements with the Chinese. All of their loans should now be callable.

  • Natalie Solent (Essex)

    george m weinberg
    May 20, 2023 at 3:06 pm · Edit
    You expected elephants on the tarmac? I call bs.

    On the tarmac of the airport built with borrowed money in the president’s home village I expect grass and rats, but I must admit I didn’t think of elephants.

  • Steven R

    Perry, Europe is, once again, relying on the US to fund the solution to a European problem. I realize that Latvia’s contribution to the war effort by GDP percentage is fantastic, it’s offset by other larger nations not pulling their weight in GDP percentage. If Ukraine was all that important, the nations of Europe would be sending money hand over fist to them and giving until it hurts. They’re not. The US, a country not in Europe, has spent over twice what Europe combined has to deal with a European problem. Why? We certainly don’t have it to spend and we have a ton of domestic problems that need to be addressed first.

    In short, Europe is wanting the US to keep writing checks on an account that is almost 32 trillion overdrawn. We’re broke. Until Putin rolls over the border into a NATO country, it isn’t really a US concern.

  • Fraser Orr

    @Steven R
    Of course the Chinese could just send troops to make an example of a country or two. Since they sit on the UN Security Counsel and have veto powers no UN troops will be forthcoming to counter the move

    Emm, I think you are confusing the Chinese with the US. It is the US (and NATO) that sends troops into every little shithole country in the world. China never does. In fact one of the big questions about a Taiwan invasion is how the Chinese military will perform because they have almost never been tested in battle.

    I haven’t dug into this in detail (and I defer to BobbyB on obscure points of international law) but on the surface it seems to me that the Chinese are being smart here. They have arranged their loans with shady characters to make sure that they can get paid back. The fact that the giant international boys club of nations who do their usual “it isn’t our money so why should we care” approach just shows that, for all its evil and faults, once again the Chinese are schooling the West in how to get shit done. FFS they have grown their economy, in thirty years pulling it from an agrarian socialist hellhole into one of the world’s most powerful economy, while the USA has circled into a spiral of unsustainable debt, self loathing and implacable statism. To be clear, I loathe the CCP, but one cannot deny their effectiveness.

    As to Ukraine, I see no reason to change my mind as to what I have said for a while here — it is just a grinding war designed to consume western arms manufacturers goods, bolster American politicians’ re-election campaigns and allow the free passage of planeloads of cash and corruption between governments, and it will continue as long as the Western governments can make it do so, since it is so shockingly profitable in pecuniary and non pecuniary terms. And the price is paid in the blood of Ukrainians and conscript Russians, subject to a modern order 227: “Not one step back”.

  • The US, a country not in Europe, has spent over twice what Europe combined has to deal with a European problem. Why?

    Are you really that clueless about what has driven US foreign policies since 1945?

    We’re broke.

    Clearly untrue.

    Until Putin rolls over the border into a NATO country, it isn’t really a US concern.

    I get that you skipped 1938 in your history lessons, which is why it’s great that yours is very much a minority view.

  • And the price is paid in the blood of Ukrainians and conscript Russians, subject to a modern order 227: “Not one step back”.

    Oh please. There are many reasonable grounds on which to object to US involvement in Ukraine’s defence but if Russia getting to overrun Ukraine entirely or partially is ok with you, spare me talk about how much you care about the blood of Ukrainians, given Russia’s opening discussed objective to exterminate the Ukrainian intelligentsia & anyone harbouring the idea of Ukrainian nationhood.

  • Steven R

    I get that you skipped 1938 in your history lessons, which is why it’s great that yours is very much a minority view.

    That would be the time the Europeans did nothing to fix a European problem before it got out of hand and ultimately ended up needing the United States to save them from themselves? That 1938?

    That’s becoming a bit of a recurring issue.

  • That would be the time the Europeans did nothing to fix a European problem before it got out of hand

    Which is not what is happening this time, fortunately.

  • Fraser Orr

    @Perry de Havilland (London)
    given Russia’s opening discussed objective to exterminate the Ukrainian intelligentsia & anyone harbouring the idea of Ukrainian nationhood.

    If we are to talk about “potential for bloodshed” rather than the actual blood of actual innocent people running in the streets, may I point out that you are advocating a policy of nuclear brinkmanship that puts us closer to nuclear war than probably at any other time in history. If we are to assume the claim that mad Putin would do a purge in Ukraine is it not just as reasonable to think that should that same mad Putin lose unconditionally and be threatened with his own end, something I believe you have strongly advocated for, that he will burn the whole thing down as he goes out the door? I don’t only think that is possible, I think it is almost certainly how he will try to go out. Whether someone will be able to stop him or not I don’t know. Though he does seem to have the Russian leadership sown up pretty tight.

    Thankfully the politicians don’t have the same agenda as this. They don’t really want to win, they just want to grind it out for as long as possible. Which I suppose is better than the sort of full commitment to regime change that I have seen advocated here often. One of the few times their utter mendacity and corruption actually serves to our advantage.

  • If we are to talk about “potential for bloodshed” rather than the actual blood of actual innocent people running in the streets…

    Do I really need to link to actual, not potential, examples of Russian atrocities?

    I don’t agree with your analysis at all, but even by your own metrics, once again it is clear that “price is paid in the blood of Ukrainians” was pure rhetorical device. If you are willing to see Ukraine go under the bus because you fear nuclear war, fine, say so, but accept the price in Ukrainian blood your preferred choice comes with.

    may I point out that you are advocating a policy of nuclear brinkmanship that puts us closer to nuclear war than probably at any other time in history

    So if the other bloke has nukes, where do *you* draw the red line? Ukraine? Clearly not.

    Moldova? Baltics? Slovakia? Poland? Denmark? Germany? If so, why? Or to look it is the other way around, if not Ukraine, then why risk nuclear war for the sake of Latvia? Poland? Germany? If you will not see Russia prevented from taking Ukraine because they have nukes, just accept that Russia has to be given anything it demands.

    If Russia takes Ukraine, are you really doing to argue what comes after is peace & a happy content Russia that has no further interest in continuing to expand to re-establish the entire Russian/Soviet Empire? They will stop once they have Ukraine just like Chamberlain hoped Hitler would stop once Germany had the Sudetenland?

    They don’t really want to win, they just want to grind it out for as long as possible.

    Evidence?

  • Fraser Orr

    @Perry de Havilland (London)
    Do I really need to link to actual, not potential, examples of Russian atrocities?

    There have been atrocities in every war since cavemen started throwing rocks at each other.

    If you are willing to see Ukraine go under the bus because you fear nuclear war, fine, say so, but accept the price in Ukrainian blood your preferred choice comes with.

    That’s a false dilemma. The Ukraine war should never have been allowed to be started. Putin’s view of Ukraine as a constituent part of Russia is the same today as it has been since he entered power. What is different? The political environment. A breathtakingly weak USA, a fat and self absorbed Europe, a burgeoning China no longer dependent on America’s good graces, an international order happy to snub sanctions and a horribly corrupt regime in Ukraine itself. Oh, and let’s not forget oil prices sky high due to the Green New Deal and its cousins.

    But we can’t change the past. What we can change is the future. And the correct strategy here is to negotiate a peace. And FWIW, the best long term containment strategy is to reduce the price of oil dramatically by drilling, fracking and building pipelines.

    And there is a similar dilemma in Taiwan. What is the solution there? If I were Taiwan I’d be building the place into a fortress. I’d be working like hell to build international connections, I’d be engaged in a massive information campaign to get to people, and especially the Chinese people and I’d be negotiating insofar as I could with China. On the darker side I’d be spying like crazy and bribing the fuck out of people like crazy. FFS Europe laid prostrate with its neck bare as the hungry bear roamed around them by choosing to get all their energy from their historical and implacable enemy. I mean what could go wrong there?

    So if the other bloke has nukes, where do *you* draw the red line? Ukraine? Clearly not.

    Nuclear weapons are for existential crises. If you are going to die anyway, you might want to take the bastards that did it with you. The USA is entangled in the NATO alliance so I suppose we have to defend those people too, even though they (with some exceptions including Britain, France and Poland) have NEVER been responsible enough to take on the mantle of their own defense (like some 35 year old living in his mom’s basement.)

    But I apologize. I think I have drug this thread off topic, and I have been round and round with people, including PdH on this Ukrainian war subject before. I do think that the OP on China and its loan strategy is a more interesting part of my original comment.

    I also just realized that an abbreviation of your name, PdH, is one transposition away from PhD. I’m not quite sure what to make of that 😀

  • Paul Marks.

    “We are broke” – “Clearly untrue”.

    No, it is true Perry. Creating “money” from nothing and using it to pay your bills, which is what the United States (and the financial entities) do, is fraud – indeed calling fraud is being very generous, it is extortion, despotism, tyranny. A system designed to benefit a tiny elite at the expense of everyone else – the Cantillon Effect carried out to the ultimate extreme.

    Professor Paul Krugman (“Nobel Prize” winner – even though Alfred Nobel did NOT set up a prize for economics) has the opposite politics to mine – but I agree with him on one point.

    The American monetary and financial system (including the banks and other financial entities) has got nothing to do with capitalism – it is based on “men with guns”. Professor Krugman thinks that is a GOOD thing (because he supports tyranny).

    That is the American, indeed the general world, monetary and financial system – men with guns making threats of violence, in the interests of a small group.

    Not a commodity money (not gold, not silver, NOTHING), not Real Savings (not the actual sacrifice of consumption), not thrift, hard work and self denial, men-with-guns making threats – that is what the system is.

    Of course the United States is broke, and so is the United Kingdom.

    And, NO, even higher taxes (on top of record high taxation), the “solution” offered by the Economist magazine, will not make things better – it will make everything worse.
    .

  • That’s a false dilemma. The Ukraine war should never have been allowed to be started.

    Yeah but it did. If the response in 2014 had been an order of magnitude harsher, this could have been avoided, but too many people feared confronting Russia. And confronting Russia is what you seem to be against now.

    And the correct strategy here is to negotiate a peace.

    Good luck with that this side of Russia’s military position deteriorating considerably from where it is now. At the very minimum, Russia needs to be pushed back to the start line in February 2022 before ‘peace’ is even discussed. But after what has happened to Ukraine, hard to see Zelenskyy surviving politically if he stops pushing without getting more than just that.

    And FWIW, the best long term containment strategy is to reduce the price of oil dramatically by drilling, fracking and building pipelines.

    No argument from me on that.

    Nuclear weapons are for existential crises. If you are going to die anyway, you might want to take the bastards that did it with you.

    Indeed. Which is why Russian nuclear threats are hollow. If they are pushed back to the 1991 border, and they should be, that does not mean the end of Russia (unfortunately).

  • Paul Marks.

    Even back in the early 1900s people were drawing exactly the wrong conclusions from financial and monetary events.

    President William Howard Taft (a moderate – not an extreme Progressive) said of the banking bust of 1907 that it showed there should be “more flexibility” in the system.

    That was exactly the WRONG conclusion – yet it was a very common conclusion, and led to the creation of the accursed Federal Reserve system.

    In reality what the 1907 bust showed is what all other busts show – that “flexibility” (lending out “money” that does-not-exist) is the problem, not the solution.

    There should not have been “more flexibility” – there should have been no flexibility, none. Lending should be of actual money – and the money lender (let us get rid of this word “banker” it just confuses everything) should understand that once they have lent out the money (whether their own savings or the savings of other people entrusted to them) they do not have that money any more – till when-and-if they are repaid.

    To use technical language – there should only be the “monetary base” (whatever it is – gold, silver, whatever it is that people are using as money), not “broad money”, “bank money”, or whatever someone wants to call the Credit Bubble.

    But if Credit Bubble money is allowed, banks must NOT be “saved” – no “suspension of cash payments” by corrupt courts (if a judge does not understand that he or she is not there to serve the banks – then they need to be removed), no “bank holidays”, none of this corruption.

    Cash on the nail when the customer demands it – and if the banker can not pay, the bank is over. Perhaps the words “banker” and “bank” should not be used – as they are so corrupted. “Money lender” is a better term.

  • No, it is true Perry.

    Are people still accepting US dollars? Yes? Then as fucked up as things are (& they are), the USA ain’t broke. The aircraft carriers are still being built & fuelled, the F-35s are still coming off the production lines, the monster truck derbies are still attended, the supermarkets are still packed to overflowing with food laced with corn syrup. Get back to me when the USD goes to zero, or at least when it takes a wheelbarrow full of cash to buy a well processed meal at Arby’s.

  • Paul Marks.

    As for higher taxation to solve an economic crises – the “solution” of the despicable Economist magazine. We have been down this road before.

    In reaction to the crash of 1929 – the end of the Benjamin Strong (New York Federal Reserve) Credit Bubble of the late 1920s, taxation in the United States was massively increased.

    The top rate of income tax went up from 25% to 60% (this was before Franklin Roosevelt became President), and the taxes on imports more than doubled.

    The American government also prevented the fall in real wages – President Herbert “The Forgotten Progressive” Hoover was the first President in American history to do that.

    In all the Credit Money busts in the United States from 1819 to 1921 such policies of massively increasing taxation and actively intervening in the labour market to prevent the fall of Real Wages (what people in the time of President Hoover called “demand”) had never been tried before.

    The economic record of 1929 to 1933 is not a great success.

    “But we were told that President Hoover believed in laissez-faire”.

    You have also been told that the crushing increase in taxation in Ireland in the late 1840s was “laissez-faire”.

    As for Russia….

    The Credit Bubble financial system set up in Russia by people associated with the Clinton Administration led to economic collapse.

    People were utterly ruined.

    That is what led to PUTIN.

    The Russian people were told that what was created was “capitalism”, the “free market” – so that is what they believe has failed in Russia.

    In reality it was not capitalism, it was not free enterprise, it was Bankerism – a massive Credit Bubble monetary system, that ruined the people in order to benefit a tiny group.

  • Paul Marks.

    “The U.S. is not broke” – yes it is Perry.

    The “men with guns” are used precisely because it is broke.

    If it was not broke, they would not be needed.

    Nor is this just a “technical matter” of the monetary and financial system being a massive fraud (which it is), the vast cities have very little economic base.

    The cities still have millions of people – there is a lot of consumption, but there is little production in these cities.

    London used to have much manufacturing – it does not really now.

    And New York and the other great American cities are just as bad – if not worse.

  • Snorri Godhi

    And FWIW, the best long term containment strategy is to reduce the price of oil dramatically by drilling, fracking and building pipelines.

    Perry replied: “No argument from me on that.”

    I’d go much further than that:
    (a) Reducing the price of oil (or more generally, energy) is so crucial, not only to contain the Russian threat but to healing the American economy, that discussing the cost of aiding Ukraine becomes an exercise in futility.

    (b) The first US Presidential candidate who points this out, must be presumed to be the least brain-damaged.

  • Fraser Orr

    @Perry de Havilland (London)
    Indeed. Which is why Russian nuclear threats are hollow. If they are pushed back to the 1991 border, and they should be, that does not mean the end of Russia (unfortunately).

    Not the end of Russia, but it could easily be the end of Putin, and it is his finger on the button. That is why I referred in my comments specifically to Putin not the Russian government. Which is why I think his threat is very far from hollow. But that isn’t what is going to happen. What will happen is a continual grind for a very long time with a very unpredictable denouement. I’d would have said that the outcome depends on the 2024 Presidential election, but I don’t think that is true because it is looking more an more certain we will be getting drooling moron Biden again, and, hard thought it is to imagine, someone worse, Kamala Harris as first on the bench, should the puppeteers of Biden accidentally break one of his strings.

  • Paul Marks.

    Why do people accept fiat (fiat = will, command) “Dollars” for international imports of food, raw materials and manufactured goods.

    The “Dollar” is not gold, or silver, or anything else people might value – so why give food, raw materials and manufactured goods for this NOTHING (for this lights on computer screens which can be manipulated, or turned off, on the whims of the powerful).

    It seems insane – but then Perry mentions the Aircraft Carriers and so, and suddenly the seeming insanity makes perfect sense. The economic system, the endless consumption of the many millions of people in the vast cities of the United States (where little production occurs these days), is based on force-and-fear.

    And the other fiat currency, credit bubble, systems, are based on their relationship to this “international reserve currency”, the “U.S. Dollar”, which is based on force and fear – Professor Krugman’s beloved “men with guns” (remember Professor Krugman is not against this accursed system – he loves it).

    Russians may indeed be wrong about many things – but they do understand what the “Western economic system” is now based upon.

    The question is – how much longer can the “Western economic system” based on the worthless (inherently worthless) “U.S. Dollar” “international reserve currency” last? The elite do not really believe in it themselves – even Professor Krugman and the rest of them do NOT love the “Dollar” (they despise the “Dollar”), they love the “men with guns”, the force and fear – and they want the force and fear for an international digital currency.

    I suspect this international digital currency (also based on force and fear) will be introduced before the end of the Biden/Harris Administration.

    This is not about America – this is an international movement. An international movement of evil.

  • Paul Marks.

    As the leading manufacturing power on Earth (with manufacturing output perhaps twice that of the United States) the Communist Party Dictatorship of the People’s Republic of China will demand control of the international digital currency that is to replace the “Dollar”.

    The Western government and corporate elite (the WEF crowd) will not like this – they want China to be their puppet, but the Chinese dictatorship will not accept that (after all the economy of some Chinese cities is real, they actually make things, not fake like so many American cities).

    This may lead to some unpleasantness – or the Western elite may quietly give in (whilst pretending to denounce China).

  • Paul Marks.

    The establishment point of view (represented, as ever, by the Economist magazine) is that Americans and others should buy even MORE Chinese goods. Such insanity is good for “the Climate crises” we are told, do not Chinese factories produce C02 – why does C02 produced in China not count?

    How these Chinese goods are to be paid for (with both American corporations and individuals drowning in debt – and the American government de facto bankrupt) is not explained.

    The idea seems to be return to Roman times – when the Romans paid for Chinese silk and other goods with gold and silver, WITHOUT paying the Chinese gold or silver.

    There is no reason for China to accept “payment” in worthless “Dollars” (which are just lights on computer screens – lights which can be manipulated, or just turned off – as was done with the Russian “foreign exchange reserves”, on the whims of the powerful). No reason other than the Western military forces that Perry mentions.

    But “make us all sorts of stuff, and accept our worthless Credit as payment” can not last for much longer.

    In the late 1700s the East Indian Company used to pay for Chinese goods with opium, the East India Company were crooks and murderers (see Edmund Burke’s prosecution of Warren Hastings over years – and also see the Bengal famine of the 1790s which was partly due to the EIC forcing farmers to grow opium rather than food) – but even they did think of just creating endless amounts of fiat money and pretending that was “payment”. However, the modern Chinese are unlikely to accept narcotics as payment.

    Indeed China experts vast amounts of fentanyl and other drugs to Western nations – mostly to the dying United States (literally dying in this case – as the drugs kill tens of thousands of Americans every year) – they do this partly out of greed-and-hate, but also as a form of perverted revenge for the opium trade of centuries past.

    Since at least the 1960s Americans, and other Westerners, have been taught that self control (self denial) is bad – “if it feels good, do it!” has been the message (Kipling’s poems “If” and “The Gods of the Copybook Headings” are still known – but their message has not been fashionable for a very long time indeed).

    That is a good way to get vast numbers of people killed. And to get the people who are not killed, buried in debt.

    Debt that creating even more “money” from nothing, will not pay.

  • TMLutas

    In 2022, shortly before the invasion, President Zelensky made a speech at the Munich Security Conference. In that speech, he threatened to pull out of the NPT and to rearm Ukraine with nuclear weapons if the Budapest Memorandum principals, which include the United States, do not meet and resolve the 2014 loss of Ukrainian territory.

    Any analysis of the present situation in Ukraine that does not take that speech into account is hopelessly divorced from reality. Unfortunately, that seems to include what is said above in this thread.

    You can see a transcript of the speech here:
    https://kyivindependent.com/national/zelenskys-full-speech-at-munich-security-conference

    The relevant pull quote is below:
    Since 2014, Ukraine has tried three times to convene consultations with the guarantor states of the Budapest Memorandum. Three times without success. Today Ukraine will do it for the fourth time. I, as President, will do this for the first time. But both Ukraine and I are doing this for the last time. I am initiating consultations in the framework of the Budapest Memorandum. The Minister of Foreign Affairs was commissioned to convene them. If they do not happen again or their results do not guarantee security for our country, Ukraine will have every right to believe that the Budapest Memorandum is not working and all the package decisions of 1994 are in doubt.

  • Fraser Orr

    @TMLucas I’m not sure what your point is. How is Ukraine going to rearm itself with nuclear weapons? It can’t even make its own bullets right now. Whatever the resolution of this matter is, I guarantee you it will not involve Ukraine having nuclear weapons. So Ukraine’s threat to pull out of the NPT is about as significant is if Tonga threatened to pull out of the NPT.

    If your point is that Ukraine has been duped by the international order or treated badly, I’d agree.

  • Ferox

    More likely that Ukraine stashed a couple of nukes in a cave someplace before disarming, just in case. And who wouldn’t do that, with Russia as their neighbor?

    Now they have the perfect excuse to bring them out into the daylight again.

  • Paul Marks.

    TM Lucas – in spite of his speech in 2022 I do not believe that President Zelensky had any serious intention of arming the Ukraine with nuclear weapons (he must know that any effort to do that would provoke a full scale nuclear attack from Russia) – although, yes, if Mr Putin believed Mr Zelensky (which I do NOT believe he did) the logical response to such a belief would be to invade before the Ukraine had nuclear weapons.

    Ferox – no, the Ukraine does not have nuclear weapons stashed somewhere.

    If Ukraine did have nuclear weapons – that would be clear breach of the agreement made on the breakup of the Soviet Union. What you are claiming would make Mr Putin “the good guy” trying to end a regime that had “stashed” nuclear weapons away in violation of its agreement. Mr Putin is NOT “the good guy” – Ukraine does not have nuclear weapons.

  • More likely that Ukraine stashed a couple of nukes in a cave someplace before disarming, just in case.

    Nukes only work if people know you have them. For example, Israel’s nukes are the worst kept secret ever in one of the few nations actually good at keeping secrets 😉

  • Snorri Godhi

    Ideally, i’d like to see joint ownership of nukes by Ukraine, Poland, Romania, and the Baltics.

    An arrangement that might provide a reasonable level of safety, is that the agreement of 3 partners is required to launch nukes.
    (Reluctantly, i would accept the further requirement that not all 3 should be Baltics.)

    Belarus would be very welcome to join this alliance, if decoupled from Moscow; but that is even more utopian.

    — added in proof: and of course Moldova.

  • Chester Draws

    As the leading manufacturing power on Earth (with manufacturing output perhaps twice that of the United States) the Communist Party Dictatorship of the People’s Republic of China will demand control of the international digital currency that is to replace the “Dollar”.

    It can demand all it likes, but it won’t get it.

    The problem for the Chinese is that they clearly want to game everything for their own short term personal gain. If that means unstabilising several countries, then they are prepared to do that.

    The West isn’t going to use the Chinese currency (which one? they have a couple, precisely to play silly buggers) because the Chinese demand it. This is one area where persuasion is required.

    Plus, let’s face it, China isn’t long-term stable, politically or financially. There’s some obvious issues brewing, and Xi is equally obviously not addressing them.

  • Fraser Orr

    @Perry de Havilland (London)
    Nukes only work if people know you have them. For example, Israel’s nukes are the worst kept secret ever in one of the few nations actually good at keeping secrets

    Well if you want to use them as a deterrent. But if you want to actually use them, secrecy might be an advantage.

    Nonetheless, the idea of nukes in a cave probably doesn’t wash. Nuclear weapons aren’t like a stash of bullets. They need constant maintenance by experts to keep them viable. Especially so Plutonium weapons, because the Plutonium’s half life is short enough that it needs to be replaced regularly — every ten years if I remember correctly. Short enough that the any Plutonium weapons from the 1990s would be useless today if they hadn’t had their fissile material replaced. U235 has a much longer half life, but they still need to be serviced regularly by experts.

  • Fraser Orr

    @Chester Draws
    The West isn’t going to use the Chinese currency (which one? they have a couple, precisely to play silly buggers) because the Chinese demand it.

    They have two? Do you mean RMB verses Yuan? They are the same thing, the words just being used in different contexts. If you look here you will see both words on 100 yuan note. The difference is that Renminbi is the name of the currency, and yuan is the way it is counted. So this is a Renmibi bank note of 100 yuan. Though in practice the words are largely interchangeable.

    This is one area where persuasion is required.

    The way it works is this:
    China: I have this product to sell. Would you like to buy it?
    USA: Sure, how much?
    China: 100RMB
    USA: WFT is an RMB, how much in dollars?
    China: Sorry we can’t spend dollars at home anymore, so please convert to RMB if you really want this product.

    Which is to say, the seller can set the terms (including the currency of the deal.) The US was strong enough that they had more power in the negotiation, but that is getting less and less true. If we want to keep buying cheap Chinese products they can certainly insist we trade in RMB.

    Plus, let’s face it, China isn’t long-term stable, politically or financially. There’s some obvious issues brewing, and Xi is equally obviously not addressing them.

    And the USA is a paragon of stable, conservative management, and the politicians are laser focused on the issues that really matter long term for the American people? Right? Xi, for all his many, many faults, is a brilliant manager, and an excellent politician.